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Series 7 Top-off Exam > Customer Accounts & Retirement Plans > Flashcards

Flashcards in Customer Accounts & Retirement Plans Deck (122)
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What type of joint account allows for a specified percentage of ownership of each party in the account?

Tenancy in Common


What is the FINRA "know your customer" rule?

This rule states that the registered representative and the member firm must use reasonable due dilligence to discover and maintain essential facts about every customer. Name, Social Security Number, Address, and DOB are required. Beyond that, a customer can refuse to provide more information and the firm is under no obligation to try to obtain more. 


Whose signature is required on the new account form?

Only the principal's

The customer's signature isn't required at account opening (so accounts can be opened over the phone). 


Suitability Rule

States that the firm or registered representative must have a "reasonable basis" to recommend a strategy or investment. 


discretionary account

An account where the investor gives the broker power to make investment decisions for the account holder. Specifically, the registered rep has the authority to choose the asset, action (buy or sell) and/or amount. To establish a discretionary account, a written power of attorney is required.


How does a full power of attorney differ from a limited power of attorney?

A limited power of attorney allows the holder to trade (buy and sell securities) on behalf of the account owner, whereas a full power of attorney allows the holder to trade as well as withdraw cash from the account.


durable power of attorney

A type of power of attorney that continues even if a grantor is declared legally or mentally incompetent by a court.


What type of joint account allows for each party to own an undivided interest in the account - if one person dies the other party owns the entire account.

Joint Tenancy with Rights of Survivorship


An individual wants to establish an account and have a named beneficiary. They should open a

Transfer on Death (TOD) account


What is a customer account that allows the broker to trade but not to withdraw funds?

Limited power of attorney


What type of joint account is a divided account?

Tenants in Common (TIC)


In what type of joint account do all parties have an undivided interest in the account?

Joint Tenants with Rights of Survivorship (JTWROS)


In a joint account, who must checks be made out to?

All registered account owners


What is the system created after 9/11 for customer identification?

CIP - Customer Identification plan 

Required Post-9/11, all customers' identification must be verified through this system promptly after account opened. If a customer cannot be identified, the account is not closed, but identification must ultimately be verified.


When securities are held in street name, to whom do companies send dividends?

"Street name" refers to securities held for customers, but in the name of the dealer. In this situation, the customer is still the beneficial owner of the security and retains all ownership rights inclduing dividends.


How are corporations taxed on dividends received from other corporations?

If a company owns stock of another company and receives a dividend, 50% of the dividends received are tax-free and the remaining 50% are taxed at the company's corporate rate.


wrap account

An account, offered by a broker-dealer, that charges a single fee for both advisory and execution services. Usually charged as a percentage of assets. 


adjusted gross income

Used in the calculation of personal income tax and is calculated before deductions or exemptions are made. 


Regulation that requires sheltering of private customer information and privacy notices

Regulation S-P


When principal approval is required for a new customer account

At or promptly after the first transaction in the account


Type of trading authorization granted to permit a third party to make trades but not withdraw cash or securities

Limited trading authorization


Type of trading authorization granted to permit a third party to make trades and withdraw cash or securities

Full trading authorization


Two types of custodial accounts established for minors



Joint account that passes assets to surviving owner at death with no probate

Joint tenancy with rights of survivorship (JTWROS)


Type of account that passes assets at death by will to the heirs

Joint tenants in common (JTIC)


Type of joint account that permits unequal ownership interests

Joint tenants in common (JTIC)


Type of joint account that requires equal ownership interests

Joint tenancy with rights of survivorship (JTWROS)


Type of account that authorizes registered representatives to make trades on behalf of the customer



Type of individual account that passes assets to a named beneficiary at death and avoids probate

Transfer on death (TOD)


Three trading restrictions for a custodial account

Short sales, uncovered options, margin accounts